Financial Planner Explains How Easy It Is To Move From Cash To Investments

The recession has scared so many investors from the market that a
lot are still sitting on cash.

"Some of them are in their 50s and in their late 30s and 40s went
through the Dot Com crash," Nick Olesen, a Pennsylvania-based
financial planner, tells Business
Insider.

"The market crashed so much that a lot of them said it's not
worth it. So they went into CDs and other fixed-interest types of
things, or they went all in bonds."

Still, Olesen says he's noticed a dramatic shift in recent
months. "Those people are starting to realize they just missed
out on a 100% rally in the market, or they're just wanting to get
back in after seeing they can't keep up with inflation," he
says.

Moving your cash to an investment portfolio can be done
overnight, but it's better to do it over the course of a year, so
the status quo doesn't "shock your system too much," Olesen says.
"It's not something you jump into with both feet and say,
'Whatever happens, happens.'"

We asked the planner, who's been featured in SmartMoney and
Wall
Street Journal, to break down how he helps wary clients move
into the market.

Getting started

First, you'll need to assess your risk tolerance, says Olesen.
Are you willing to bet more on stocks for larger returns, or
would you prefer to play it safe and stay in bonds? Find out by
punching in "risk tolerance quiz" to take some from Fidelity,
SmartMoney, etc. to see where you stand.

"Let's say you're moderate," Olesen says, "you'll want 50% in
stocks, 40% in bonds and 10% in commodities. That should be your
goal for 6 to 12 months from now. It's not your goal
today."

Short of seeking help from an advisor, self-disciplined investors
can visit "the Charles Schwabs, Fidelities or Vanguards" to see
what mutual funds are available, says our expert.

"Some people get tripped up on the language, but all these places
can hold whatever you need except for a 401(K)," Olesen says. "Go
to one of their sites, see which one you like the best, which
feels more 'you,' and user friendly," and then dive in.

From there, research the products you're considering to gauge
their performance. "That's honestly how you'd debate which one to
invest in," adds Olsen, knowing "whether it's beating its
benchmark."

Braving the waters

Now that you've determined your risk tolerance and what type of
funds you'd like, it's time to start moving your cash.

"If you're starting in cash, take half of what should be in bonds
and put it in the bond market, municipals, conservative
investments, etc.," Olesen says. "Next month, add another 20% to
finish what you need in bonds, then add large cap stocks, and so
on ... Normally, I'd go from short-term bonds to
longer-term bonds, large cap stocks (high dividend paying) to
small cap stocks, international to emerging markets, then
alternative investments."

The idea is to gradually move from the most conservative type of
investment to the most risky over a long stretch of time. Yes,
it'll take time to implement it fully and you might miss out on a
gain or two, but "you have to go into it from the portfolio
earning zero or 1% to having the potential to earn much more,"
says Olesen. "This strategy will get you there eventually."